While performing an internal audit of the U. S. Department of Housing and Urban Development’s (HUD) Home Equity Conversion Mortgage (HECM) program, we noted one HECM loan underwritten by Financial Freedom Senior Funding Corporation, (Financial Freedom) of Irvine, CA, that was improperly insured as the property had several years of deferred property taxes, which is a violation of the HECM regulations. Neither Financial Freedom’s loan correspondent, 1ST AA Reverse Mortgage, Inc., nor the title company found that the property had property tax deferments totaling $14,285 covering approximately 20 years. As neither the originating lender nor the borrower had paid the taxes before the loan closed, HECM regulations were not followed, and the loan should not have been FHA insured. As of February 28, 2010, the loan’s unpaid principal balance was $74,906, and the maximum claim amount was $77,900. We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require Financial Freedom to indemnify HUD for HECM loan number 491-8453315, with a principal balance of $74,906.